Net income fell to $274.5 million, or 38 cents a share, from $289.9 million, or 39 cents, a year earlier, the Framingham, Mass.-based company
SPLS
said. Sales in the quarter ended Nov. 3 rose 8.7% to $5.17 billion.

Excluding a $24 million charge related to settlement of California wage and hour class action lawsuit, Staples said it would have earned 42 cents a share. On that basis, analysts, on average, expected profit of 40-cent a share with sales of $5.19 billion, according to Thomson Financial.

The company forecast fourth-quarter and full-year per-share profit to each rise about 15%, excluding the litigation charge. On a full-year basis, that translated to profit of about $1.43, beating analysts' estimates of $1.41 to reflect better than expected third-quarter results.

Staples said it was able to control expense to help counter slowing sales of furniture and other durable goods in North American retail unit. While total same-store sales in the region declined, sales of higher margin office products climbed. The company also is expanding in overseas markets such as China and India to help spur demand. Staples said it continues to gain share and said it's optimistic about its long-term outlook even as it anticipates near-term economic pressures.

Staples' results set it apart from its rivals, analysts said. Office Depot Inc.
ODP, -5.48%
said Monday sales for the fourth quarter are softer than a year earlier and it sees sales for the first quarter to "remain challenged."

"While the near term should stay challenging, Staples is benefiting from the weak dollar, strength in Canada and market share gains both domestically and overseas," Credit Suisse analyst Gary Balter said in a note published after the earnings.

North American retail sales rose 3%. Sales at stores open at least a year, an industry benchmark known as same-store sales, in the region declined 3%, hurt by lower demand for business machines, furniture and computers.

"We've experienced a real slowdown in the purchase of durable goods, which seems to be driven by some of the general economic trends, particularly in the housing market," management said on a call with analysts.

North American delivery sales jumped 15%.

International sales surged 18% and would have increased 8% excluding the impact of foreign currency translations, the company said.

It forecast fourth-quarter sales to rise in the double digit percentage rate with same-store sales flat to slightly negative.

Fiscal 2008 per-share profit, excluding charges, would rise in the "low teens" rate, lower than the company's long-term target of a 15% to 20% rate, Staples forecast. It estimated sales to rise in the high single digit percentage rate.

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